KUALA LUMPUR (Aug 7): CGS-CIMB Research has maintained its “Reduce” rating on Unisem (M) Bhd at RM2.14 with a lower target price of RM1.80 (from RM2.30) and said Unisem’s 1H19 results missed expectations at 21%/23% of house/consensus FY19 net profit forecast due to lower sales volume following escalation in trade tension.
In a note Aug 6, the research house said Unisem expects flat q-o-q sales growth in 3Q19 due to gradual resumption of demand and lower revenue from Batam ahead of its closure in Sep.
“The group expects sluggish demand to continue in 2H19 due to uncertainty over the trade war.
“Although the group projects stronger sales from ramping up production of new microphone sensors in 2H19, this could be offset by lower sales from Batam plant ahead of its closure in Sep. Moreover, the group has finally completed the facilitation of its new 12’ wafer bumping expansion and it expects to start customer qualification in 2H19.
“We cut FY19-21F EPS by 21-39%. Maintain Reduce. Delay in 5G network expansion and prolonged demand weakness are potential de-rating catalysts,” it said.